Monday, September 29, 2008

"Laissez-faire"?

The standard summary of conservative economics is "laissez-faire," which is roughly translated as "leave it alone." Liberals assume that anyone who likes markets thinks that government should be hands-off.

Conservatives certainly feed this belief by being bristly about liberal proposals to interfere with the market. In this they manifest the truth in the phrase laissez-faire, which means not "leave it alone" but "let it do what it does." On a metaphysical plane, laissez-faire could express a fairly sophisticated understanding of nature, of letting each thing be what it is, not by leaving it alone, but by respecting its nature, letting it do what it does. When conservatives say "leave it alone," this is what they mean.

But of course "laissez-faire" is not used in a metaphysical sense -- indeed, it is rarely used by the conservatives who would think of it that way, but as a term of contempt by liberals. In order to explain how the "leave it alone" understanding of laissez-faire differs from conservative market economics, allow me to share a story.

We recently moved across country, out of an apartment in Washington, D.C., that we liked very much. The apartment was owned by a small-time investor; I rather doubt he had dealt much with renters, or really had the energy to think about it.

Before we signed the lease, he several times told us that his son lived upstairs (there were fifteen condos in the unit; ours was the only rental) and would be "a sort of on-site super." (For those who have never spent time around New York, that means a superintendent who takes care of the building and is generally present.) But over the course of the year, every question we asked the ne'er-do-well son got the same response: "uh, I'll have to ask my dad." And every request for maintenance -- before long, we learned to just call Dad ourselves -- was met by a response like, "do you know anyone who can just do that for you?" For example, when we found that their renovation had covered all the telephone jacks with drywall, when the kitchen cabinets were falling off the wall, and when we discovered, upon move-in, that almost every window-screen in the apartment had fist-sized holes in them: "Uh, can you just take care of that yourselves . . . ?"

The general practice for rentals is that you pay an extra month's rent up front as a security deposit, to cover the landlord's expenses if you disappear midway through the lease or if you leave the apartment damaged or needing cleaning. We fully expected to have deductions from our security deposit: just before we left, our three-year-old drew on the hardwood floors with permanent marker (yikes) and, with two little kids, a pregnant wife with the flu, and a cross-country drive beginning on move-out day, we made the decision not to do all the finishing touches of cleaning up.

By law and by the terms of our lease contract, we were to receive, within forty-five days of move-out, what remained of our security-deposit (amounting, we expected, to about $1,000), plus one year's interest, along with an itemized list of deductions. Having been landlords ourselves for a college program, and having lived in several rental units previously, we knew the rules and knew how they were generally followed: most landlords deduct maybe $100 for cleaning, and skim that forty-five day limit pretty close -- but basically follow the rules.

So we were holding off on buying a couch for our new apartment until August 14, day forty-five. Actually, we got a last-minute infusion of gifts from strangers, or else we would have cut our expenses so close on the move that August 14 would have been just in time to buy groceries and help us make it to September's rent. We're renters, near the bottom of the economic totem-pole; getting that check on time was pretty important. Of course, it's important for everyone: that's why we have to pay our rent on time every month, lest the landlord himself run into cash-flow problems.

Well, the long and the short of it is that our old landlord was a full month late on sending the check; I think it was September 13 when it finally arrived. By sheer coincidence, he sent the check on the very day that I sent him a letter saying, "You know, it isn't your money to keep; that's why the law sets a time limit, which you have far exceeded." I added, perhaps imprudently, but not wrongly, that, the landlord having missed his chance to send us an itemized list of deductions, I expected to receive the security deposit in full. For my trouble, I received a threatening email from the landlord, saying I better not talk about the law to him, and he'd gladly take the rest of my deposit back.

Well, on a personal level, I raged, then backed down, realizing that the $675 I thought he owed us was not worth the emotional rollercoaster I was putting myself through. I sent him a meek apology for having had the temerity to expect that I would receive the money he owed me on the date it was owed, and gave up. On a personal level, it was probably the best thing I could do.

But for our purposes here, what is the Free Market answer to all this? Is the conservative response "laissez-faire," in the sense of, "government, hands off!"

I think not. The market depends on the enforcement of contracts. It is my opinion -- I hope this is not self-interest speaking, but a clear pro-market philosophy -- that above all, the market depends on government enforcement of contracts, in both directions. Had I not payed my rent, or even not paid it on time, I would fully expect the government to have backed the landlord in evicting me. There may be personal mercy -- I have no problem with that -- but blind-folded Lady Justice should simply recognize that I promised to pay for something, and was not paying for it. Landlords cannot afford to have property occupied by people who do not pay. (More another time, perhaps, on why it is just to charge people for use of property.)

On the other hand, my landlord was in gross violation of contract. He was in violation of contract when he sent me my security deposit a month late. We all -- he as well as I -- depend on getting money, not just whenever, but when we expect it, when we contract to get it.

I think there might have been other breaches of contract, as well. What responsibilities does a landlord have, just by virtue of being a landlord? I don't know, but it should be more clear. It seems to me that if I live in a rental property and a cupboard falls off the wall, the landlord is responsible, not I.

It seems to me that certain things should go without saying. I did not carefully inspect, for example, to make sure there were phone jacks. But is that not a reasonable expectation? It seems to me that a free-market, contract economy, mandates that things that everyone would expect to be there can be expected to be there. I should not have to check, for example, to make sure that every light switch and power outlet actually works, just as at the supermarket, if I buy a jug of milk, I should not have to open it up and make sure it's actually full of milk, and not something else. If I rent an apartment, it should go without saying that the window screens would be intact, just like it should go without saying that if there are bars on the windows, they are made of metal, and are screwed on tight. Of course you have to check things; but there should be limits to how much you have to check. Contract law should presume that certain things go without saying.

And then there is the matter of verbal contracts. If a landlord shows me an apartment and tells me there is an on-site super . . . I have the right to expect someone who does basic maintenance (as has happened in even our seediest apartments in the past), even if those duties are not made explicit in the lease -- shouldn't I? And above all, I should have easy access to the government's understanding of all these things. My inability to pay for a lawyer should not mean that I have no idea what my rights are, or the landlord's obligation. That is not justice -- and it is not a free market.

A key experience at the end of this debacle should make clear precisely what I am getting at. I went on-line to find what the DC government says about the forty-five day law. I found a couple sites that indicate that the landlord is obliged to do these things in forty-five days: but nothing whatsoever explaining what happens if he doesn't, or even how I can follow up. (I spoke to a friend who is a more experienced landlord in D.C.; perhaps she was in error, but she believed I would have to take him to court, and first do days of mediation -- on an open-shut case of him not fulfilling a deadline -- which is in any case impossible for someone who has moved cross-country.) What I did find on-line, however -- and this is the point -- is a whole government-run page giving lots of information on rent-control.

Here's the point. "Laissez-faire," market economics sees rent control as a violation of the market. Prices should be negotiated between renters and landlords, so that renters can get negotiate the best terms for their needs (including cheap rent for a cheap place), and landlords can decide what is worth their investment. Price-control creates a two-tiered system in which some renters have government backing and some do not; it discourages landlords from renting, since they will get paid less than their apartments are worth; it doesn't work because it interferes with the market. For opposing this, I would get painted by liberals with the label "laissez-faire," "do nothing," "hands-off," "leave the poor out to dry."

But market economics says the government should step in precisely to protect contracts, for the sake of the poor and the rich alike. Not government "programs" substituting for the market, but government playing its legitimate role in creating a free market. Government should determine what is to be expected, and then make that clear to all parties. It should, for example, make it known that if a landlord doesn't provide phone jacks, or window screens, he will be held liable. Government should do this -- but it should also publicize what it does. Perhaps the law is on the books. But I had no access to that law.

And I had no way to enforce it. Government should also have clear public advocates, so that if I am a thousand miles away and my rights of contract are impinged -- as they clearly were, in the case of the security deposit -- I don't have to leave work, and come to D.C. so I can spend days in mediation. That is an obstacle to justice.

In fact, the liberal D.C. government is "active" in the sense of interfering with government -- but it is "passive," "laissez-faire," "hands-off," "leaving the poor without recourse" when it comes to the basic enforcement of contract. As a conservative, I want a lot more government action than I got. But I want government to enforce contracts all around, as a basic function of government and not as a luxury for those who can pay.

My wife and I are presently two-thirds of the way through the marvelous seven-and-a-half-hour BBC production of Charles Dickens's Bleak House. I highly recommend it for the superb production: great casting, acting, pacing, lighting, everything is great. And the story itself is gripping; we're on the edge of our seats.

But I also recommend it as an insight into social justice. The dominating economic problem of Bleak House is not that the economy cheats the poor, or that the rich themselves cheat the poor, but that the legal system is corrupt. The Court, rather than dealing blind justice, regardless of persons, is at the service of the rich. The solution to this problem is not (Obama-style) to make the Court move its thump to the side of the poor, but to make the Court do its job, so that the rights of all people are enforced, including the contracts they freely enter into. People should have a right, not to get what they didn't pay for, but to get what they did pay for. That takes an extraordinary amount of government energy -- but not the kind of energy the opponents of "laissez-faire" propose.